Morgan Stanley
  • Wealth Management
  • May 18, 2020

Shalett: As ‘Fear Trade’ Fades, Watch for Inflation Triggers

Coronavirus fears have propped up the dollar, but don't expect its strength to last as new signs of inflationary pressure emerge. Learn why in Wealth Management Chief Investment Officer Lisa Shalett’s May 18 interview with Bloomberg Surveillance.

Wealth Management Chief Investment Officer Lisa Shalett tells Bloomberg Surveillance:  

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“We expect most currencies to rise vs the dollar. Currencies move in relation to relative yield advantages and relative growth. For the last three to four years, the U.S. had a real yield advantage and a real growth advantage, but the coronavirus has levelled the playing field. Now it’s just the fear trade holding up the USD.

“We also expect to see a lot of lumpiness between supply and demand. The market is universally discounting the demand side, but they’re not thinking about how the sudden stop disrupted supply chains. The supply side is going to be delayed, and that could cause some price inflation as people are willing to ‘pay up’ to refill shelves.

“This narrative is still vulnerable to a resurgence in the virus, renewed trade tensions or political partisanship that interferes with extensions of the CARES Act, all of which could reverse the reflationary trend.”

Surveillance: Market Optimism with Shalett (Podcast)